2015 Market Correction

Written by Alex Shen & Andy Pratt on .

Company President Lowell D. Pratt Jr., CFA shared his thoughts earlier this morning about the market correction and our next steps on the front page of our website and LinkedIn. If you would like to know what we do during market corrections in your portfolio, those posts are great resources. This post will dive into the details underpinning the correction.

1. This correction is about international conditions rather than the US economy.

Explanations for the sell-off include plunging oil prices, slowing Chinese economic growth, company earnings and the chance that the Federal Reserve will begin raising interest rates next month. It is impossible to pinpoint any one reason for the correction and it is likely that each plays some role but the data show that this is more about international weakness and its impact on U.S. company earnings than worries of a rate increase or a U.S. recession.

Sectors Graph

Through the end of last week, the sectors losing the most ground were Energy and Information Technology. With crude oil plunging below $40 a barrel and IT firms’ reliance on overseas sales – Apple, Intel, Google, Microsoft for example – it is not surprising that these two sectors have fallen the most as global markets plunge.

If this was about the Fed’s September decision about interest rates, we would expect to see opposite movements for Financials, the consumer sectors and Utilities.

2. The correction is indiscriminate.

Don't Fear the Yuan's Devaluation

Written by Andy Pratt & Alex Shen on .

The Peoples Bank of China caught financial markets off guard with Tuesday’s surprise announcement that it will devalue the Yuan, prompting sell-offs in stock markets across Europe and the US.  Some US lawmakers condemned the move, calling into question China’s motives, that its move escalates a “currency war.”  For years, China has been accused of artificially manipulating the Yuan’s value lower to make its exports more competitive but China maintains a soft peg against the US Dollar and the recent appreciation of the dollar caused the Yuan to appreciate in tow.

What's Going on in Greece?

Written by Andy Pratt on .

The standoff between the European Central Bank and Greek government came to a tipping point early last week when the two sides couldn’t agree on the way Greece should do austerity. The Greek government called a nationwide referendum to allow the people to vote on the ECB’s bailout package but the ECB subverted that vote by refusing to offer additional emergency loans to Greek banks, causing Greece to miss a scheduled payment to the IMF and forcing its banks to close.

Burney Company Named to 2015 Financial Times 300 Top Registered Investment Advisers

Written by Andy Pratt on .

June 18, 2015 – Burney Company, is pleased to announce that it has again been named to the Financial Times 300 Top Registered Investment Advisers, as of June 18, 2015. The list recognizes top independent RIA firms from across the U.S.  

FT 300 Advisers Logo 2015This is the second annual FT 300 list, produced independently by the FT in collaboration with Ignites Research, a subsidiary of the FT that provides business intelligence on the investment management industry. More than 2,000 elite RIA firms were invited to apply for consideration, based on their assets under management (AUM). The 630 RIA firms that applied were then graded six criteria: AUM; AUM growth rate; years in existence; advanced industry credentials; online accessibility; and compliance records.  

The “average” FT 300 firm has been in existence for 23 years and manages $2.6 billion in assets.
The 300 top RIAs hail from 34 states and Washington, D.C., and, on average, saw their total AUM rise by 18% in 2014.  

The FT 300 is one in series of rankings of top advisers that the FT developed in partnership with Ignites Research: the FT 401 (DC retirement plan advisers); the FT 400 (financial advisers from traditional broker-dealer firms); and the FT 100 (women financial advisers).

Sell in May and Go Away?

Written by Andy Pratt & Alex Shen on .

One of the oldest and longest lasting Wall Street adages goes sell in May and go away. Proponents of this strategy argue for going to cash in May, skipping the summer months altogether before buying back in October.

The adage gained popularity of late due to the subpar summer returns during the 2000s.

Monthly Returns 2000 2014

This may seem like compelling evidence but an investor employing this strategy sacrificed 6.1% annually since the Financial Crisis ended. This result is consistent with other studies that show positive – if weaker – historical returns from May to October.

Monthly Returns 2009 2014

There may be times when Sell in May works but like other market timing strategies and as we found in 2012, the results do not hold over time. If two investors invested $1,000 in the S&P 500 in 1990 but one of them went to cash from May to October and the other stayed the course, the investor who stayed the course would be $3,919 richer at the end of 2014.

Sell In May Stay The Course

No one knows which direction the market is going to go this summer but history shows that the patient investor who keeps her money in the market wins out in the long run.